FTC Sues to Block Kroger and Albertsons Merger, Citing Higher Prices and Lower Wages
The U.S. Federal Trade Commission (FTC) has announced its intention to file a lawsuit to prevent the merger of supermarket giants Kroger and Albertsons. The FTC argues that the combination of these two major grocers would result in higher prices for shoppers and lower wages for workers. The lawsuit has been joined by a bipartisan group of nine attorneys general from various states.
According to the FTC, Kroger’s $24.6 billion acquisition of Albertsons would lead to additional grocery price hikes and further financial strain for consumers. Henry Liu, director of the FTC’s Bureau of Competition, stated, “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
In response, Kroger issued a statement claiming that blocking the merger would harm consumers and workers. The company argued that the FTC’s decision would result in higher food prices and fewer grocery stores at a time when communities are already facing high inflation and food deserts.
Albertsons also expressed disappointment with the FTC’s actions, accusing federal regulators of disregarding the growing dominance of larger retailers like Walmart, Amazon, and Costco. The company believes that the merger would actually strengthen them.
The proposed merger between Kroger and Albertsons has been under scrutiny by federal and state regulators for over a year. The companies announced the deal in October 2022, stating that it would allow them to better compete with larger retailers. However, the FTC argues that the merger would harm shoppers and workers, especially considering the current rise in food prices.
Kroger CEO Rodney McMullen has defended the merger, claiming that it would lower prices, boost profitability, and drive innovation in the grocery industry. The company has also pledged $500 million to reduce prices for customers and $1 billion to raise employee wages and expand benefits.
Despite Kroger’s arguments, the merger has faced resistance from two unions representing Kroger and Albertsons employees, the United Food and Commercial Workers International Union and the Teamsters union. Concerns have been raised about the potential for higher grocery prices and the market power of a larger company.
The merger between Kroger and Albertsons would create a mammoth company that could rival Walmart, the largest grocer in the U.S. The combined entity would have approximately 5,000 stores across the country. Kroger’s various supermarket banners, including its namesake stores, Fred Meyer, and Ralphs, would join forces with Albertsons’ grocery chains, such as Safeway, Acme, and Tom Thumb.
To address antitrust concerns, Kroger announced plans to sell over 400 stores to Piggly Wiggly owner C&S Wholesale Grocers, along with other assets like distribution centers and private brands. However, the FTC argues that this proposed divestiture is insufficient and would not create a true rival to the combined Kroger and Albertsons.
The FTC contends that the merger would reduce competition and result in a decline in the customer experience. The agency argues that competition between the supermarkets has led to fresher produce, better private label offerings, and services that shoppers appreciate, such as flexible pharmacy hours and curbside pickup.
Additionally, the FTC claims that the merger would leave workers with less negotiating power since there would be fewer potential grocery employers. In some markets, the combined company would be the only employer of unionized grocery workers.
As news of the FTC’s lawsuit broke, Kroger stated that it was still in discussions with regulators. The company maintains its position that the merger would benefit grocery shoppers and workers by lowering prices, creating good-paying union jobs, and increasing access to fresh food.
The outcome of this legal battle will have significant implications for the grocery industry and consumers across the country. The FTC’s concerns about higher prices and lower wages will be weighed against Kroger and Albertsons’ arguments for increased competition and improved customer experience. As the case unfolds, the future of this merger hangs in the balance.